Are Cough Drops an HSA-Eligible Medical Expense?
Unravel the complexities of HSA eligibility for common over-the-counter medical expenses. Get clear answers and practical guidance.
A Health Savings Account (HSA) provides a tax-advantaged savings mechanism designed to help individuals cover qualified medical expenses. These accounts offer a triple tax benefit: contributions are tax-deductible, earnings grow tax-free, and withdrawals for eligible medical costs are also tax-free. This article clarifies the eligibility of common over-the-counter (OTC) items, focusing on cough drops, for HSA reimbursement.
General Rules for HSA Eligibility of Over-the-Counter Items
Before 2020, over-the-counter medications and drugs were not eligible for HSA reimbursement unless a doctor provided a prescription. This requirement changed with the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. The CARES Act removed the prescription requirement for OTC medications, making them eligible retroactively to January 1, 2020.
To qualify as an eligible OTC item, the product must be used primarily for medical care, which includes the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting a structure or function of the body. Items intended for general health, cosmetic purposes, or personal hygiene do not qualify. The Internal Revenue Service (IRS) outlines these guidelines.
Specific Eligibility of Cough Drops and Related Items
Medicated cough drops are eligible for reimbursement through an HSA. Their purpose is to treat or alleviate symptoms of a medical condition, such as a cough or sore throat. The active ingredients in medicated cough drops, like menthol or eucalyptus, provide relief by targeting these symptoms.
Products resembling cough drops but lacking medicinal value, such as candies or general wellness items without active ingredients for treating a medical condition, are not eligible. Many other common OTC cold and flu remedies are also HSA-eligible, including pain relievers, fever reducers, decongestants, and multi-symptom cold and flu medications. Nasal sprays and antihistamines for allergy relief are also covered expenses.
Using Your HSA for Eligible Purchases
Two primary methods are available for using HSA funds. Many HSA providers issue a debit card specifically linked to your account, which can be used directly at the point of sale, similar to a regular debit card. This offers immediate payment for qualified medical expenses.
Alternatively, you can pay for eligible expenses out-of-pocket and seek reimbursement from your HSA. Regardless of the payment method, it is crucial to retain all receipts and detailed records for HSA purchases. These records are for tax purposes and may be required during an IRS audit to substantiate qualified medical expenses.